Agency Update

February 20, 2018

Agency yields were higher this week and the curve flattened in response to higher than expected CPI data on Wednesday.  On the week, two-year Agency yields increased 13 bps to 2.22%, 5-year Agency yields improved 10 bps to 2.68%, and yields on 10-year Agencies were higher by 5 bps to 3.23%.

Yield spreads for Agency bullets compared to Treasuries were unchanged, while yield spreads on Agency callables widened 3 to 10 bps, depending on the structure and call tenor.  Callable structures with 5-year finals compare favorably to bullets because of the enhanced relative value on a yield spread basis (see graph below).  In the near term, expect agency spreads to trade in recent ranges, although 5-year spreads remain vulnerable to some widening.




The following table reflects last week’s total issuance and call activity across GSE issuers:

Issuer Issued Called
Federal Farm Credit Banks 554,000,000
Federal Home Loan Banks 1,084,000,000 15,000,000
Federal Home Loan Mortgage Corp 100,000,000 25,000,000
Federal National Mortgage Association
Federal Agricultural Mortgage Corp 7,000,000
Total 1,745,000,000 40,000,000



Last week, Freddie Mac priced a new $2.25 billion 3-year reference note due on February 16, 2021.  The highlight of the agency large bullet calendar in the week ahead will be FHLB’s announcement on Wednesday of any plans to sell global bonds.


Notable activity last week included:






Ricky Brillard, CPA


Vining Sparks, IBG

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